Cerini v McLeods (a firm)
[2004] WASC 45
•23 MARCH 2004
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CERINI -v- McLEODS (A FIRM) [2004] WASC 45
CORAM: PULLIN J
HEARD: 26 FEBRUARY & 10 MARCH 2004
DELIVERED : 23 MARCH 2004
FILE NO/S: LPA 4 of 2002
BETWEEN: GRAHAM VICTOR CERINI
Plaintiff
AND
McLEODS (A FIRM)
Defendant
Catchwords:
Legal practitioners - Written agreement with client as to costs - Statutory review on grounds of unreasonableness - Legal Practitioners Act 1893 s 59
Legislation:
Legal Practitioners Act 1893, s 59
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr I A Morison
Defendant: Mr R I Viner QC & Mr D J Garnsworthy
Solicitors:
Plaintiff: Stables Scott
Defendant: McLeods
Case(s) referred to in judgment(s):
Brown v Talbot & Olivier (1993) 9 WAR 70
Cerini v Minister for Transport [2001] WASC 309
Cerini v Minister for Transport [2001] WASC 309 (S)
Clay v Clay (2001) 202 CLR 410
Cruickshank v Producers Markets Co‑operative Ltd [1960] WAR 184
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122(S)
Jovetic v Stoddart & Co (1992) 7 WAR 208
Case(s) also cited:
Alman v MacDonald Rudder [2001] WASC 65
Alman v MacDonald Rudder [2001] WASCA 375
Athanasiou v Ward Keller (6) Pty Ltd (1998) 122 NTR 22
Barfield v Friedman, unreported; SCt of WA (Parker J); Library No 970441; 5 September 1997
Bray v Ryan [1999] WADC 66
Burgess v Messrs D'Alessandro & Associates, unreported; SCt of WA (Anderson J); Library No 920256; 6 May 1992
Clare v Joseph [1907] 2 KB 369
D'Alessandro & D'Angelo v Bouloudas (1994) 10 WAR 191
Dissidomino v Mossensons, unreported; SCt of WA (Parker J); Library No 990019; 22 January 1999
Duckworth v Chopra [2001] WASC 146
Harrison v Hocking [2000] WASC 188
Law Society of New South Wales v Harvey [1976] 2 NSWLR 154
New South Wales Crime Commission v Fleming (1991) 24 NSWLR 116
Portch v Franconi, unreported; SCt of WA (Seaman J); Library No 940174; 31 March 1994
Pryles & Defteros v Green [1999] WASC 34
Re Morris Fletcher & Cross' Bill of Costs [1997] 2 Qd R 228
Schiliro v Gadens Ridgeway (1995) 19 Fam LR 196
Stoddart & Co v Jovetic (1993) 8 WAR 420
Weiss v Barker Gosling (No 2) (1993) 17 Fam LR 626
PULLIN J: This is an application by the plaintiff, who seeks a review of a costs agreement entered into by the plaintiff and defendant pursuant to s 59 of the Legal Practitioners Act 1893 ("Act").
The background is as follows. The plaintiff was the owner of 658 square metres of land in Newcastle Street, next to the lot of land on the corner of Newcastle and Loftus Streets, West Perth. The corner lot (owned by someone else) and 18 square metres of the plaintiff's land was resumed. The plaintiff lodged a claim for compensation for the resumed land and for injurious affection to the remaining 640 square metres. He retained a valuer to negotiate the payment of compensation, which negotiations did not prove fruitful. The claim lodged by the plaintiff in 1998 was for compensation and solatium totalling $412,500, plus interest and costs. Shortly before 19 September 2000, the plaintiff instructed the valuer to forward the files to the defendant.
The Costs Agreement
On 19 September 2000, the plaintiff met Mrs Rowley, a member of the firm of the defendant. Advice was given to the plaintiff that if compensation were to be recovered, an action for compensation would have to be commenced against the Minister for Transport. During the meeting, Mrs Rowley handed to the plaintiff a document entitled "Agreement for Terms of Engagement" ("Agreement") which she had prepared prior to his arrival. She went through the document briefly. There was discussion about the hourly rates being charged, and Mrs Rowley explained that these were charged in 6‑minute units and billed monthly. Mrs Rowley asked the plaintiff to take the Agreement home with him to read and to let her know if he had any questions. He did take the Agreement away with him. He read it and understood it. He returned the next day, 20 September 2000, with the Agreement. He did not consider that he needed independent advice about it.
On 19 September 2000, Mrs Rowley wrote to the plaintiff, summarising what had taken place at the meeting. The letter confirmed that the plaintiff would supply the defendant with information listed in the letter. It referred to the fact that the defendant had to write to the valuers to have the valuers explain methodology to the defendant and to reveal comparable sales evidence which had been used. The letter expressed some concerns about the valuation prepared by one of the valuers who had already been retained by the plaintiff. On pages 2 and 3 of the letter, reference was made to the Agreement. There was an explanation about the "loser pays" rule, and there was an explanation about the impact of O 24A of the Rules of the Supreme Court and its effect on the recoverability of costs from the defendant in the proceedings. The last two paragraphs of the letter read:
"You will appreciate that an award of costs by the Court, unless impacted with regard to indemnity by the above scenarios, is normally made on a 'taxed basis'. This means in effect that the Court will give the bare minimum which it considers to be reasonable to bring the matter to court. This firm will charge you 'solicitor and own client' costs which means that we will charge for all steps which we consider necessary to put you in the best possible position to achieve a favourable outcome. Inevitably there is a difference which is normally between 30% to 40%. That shortfall would not be covered by a court order for costs on a taxed basis.
Finally on the issue of costs, the Court has a discretion to consider the reasonableness of expert costs and that would apply to all experts whom we might need to instruct such as Steve, Ken Adam or David Liggins as a second valuer."
This letter had just been typed when the plaintiff attended at the defendant's office on 20 September 2000 to return the signed Agreement. He gave evidence that he was given the letter after he handed over the signed Agreement to Mrs Rowley's secretary. Mrs Rowley, however, remembers that when the plaintiff was given the letter, he sat and read it in the waiting room and then met with Mrs Rowley. The plaintiff then handed Mrs Rowley the signed Agreement. Even though the plaintiff was not cross‑examined about Mrs Rowley's account, I accept Mrs Rowley's account. There is a contemporary document in the form of a timesheet showing that Mrs Rowley did meet with the plaintiff, and it is highly likely that if the plaintiff was given the letter and did afterwards see Mrs Rowley, that he read the letter and handed the signed Agreement to Mrs Rowley. I should add, however, that the disagreement, and my finding, about when the signed Agreement was handed over, has no significant consequence so far as I can see.
This is because I find that there was no discussion in the meeting between Mrs Rowley and the plaintiff, or in the letter of advice dated 19 September 2000, about how costs calculated under the Supreme Court Scale might compare with the costs calculated pursuant to the Agreement. Although, as I find below, the plaintiff was an experienced businessman, he did not know about the content of the Supreme Court Scale or about item 26, which relates to compensation cases, and therefore did not know how costs calculated under the Agreement might compare with costs calculated under the Supreme Court Scale.
The Agreement which was signed by the plaintiff authorised the defendant to charge for work undertaken on a time basis. The hourly rates stated in the Agreement were as I have set out in the "net" column in the table below:
| Net | With GST | |
| D. McLEOD | $300 per hour | $330 per hour |
| G. OWEN, L. ROWLEY | $220 per hour | $242 per hour |
| EMPLOYED SOLICITOR | $150-$200 per hour | $165-$220 per hour |
| LEGALLY TRAINED CLERK OR ARTICLED CLERK | $80-$140 per hour | $88-$154 per hour |
The Agreement stated that GST was chargeable on the (net) hourly rates. I have set out the effect of that provision in the "with GST" column above.
The Agreement also provided that the firm should be entitled to charge $25 in the case of a solicitor, or $20 in the case of a legally trained clerk or articled clerk, for any telephone attendance or letter in lieu of the per‑hour basis of charging.
The Agreement also provided that the charges were subject to review from time to time, and referred to adjustments which might be made if the Supreme Court Scale were amended.
The Compensation Action in the Supreme Court
Proceedings to recover compensation were then commenced in this Court in Cerini v Minister for Transport in action CIV 2472 of 2000. The defendant was solicitor on the record for the plaintiff. After amendments to the claim, the plaintiff pursued a claim for compensation totalling $685,446.91, plus discretionary sums and interest. The trial was set down for hearing on 14 May 2001. On 18 April 2001, the defendant wrote to the plaintiff advising that the Minister had made an O 24A offer of $110,000, together with interest. In addition, the Minister had previously made an offer to purchase the unresumed portion of the land and had made an offer of $415,000, which was mainly made up of the amount which the Minister was prepared to pay for the value of the land. As well as the offer of compensation of $110,000 for the resumed land and injurious affection, the Minister was also prepared to pay interest of about $12,000, plus costs. The O 24A offer was not accepted by the plaintiff.
The trial came on for hearing before Justice Parker on 14 May 2001. At one stage, an estimate was made that the trial would last for 10 days, but as it turned out, the trial lasted 33 days, concluding on 3 July 2001, and reasons for decision were published by Justice Parker on 30 November 2001. Parker J's reasons for decision were published as Cerini v Minister for Transport [2001] WASC 309. The reasons for decision ran to 130 pages. The end result was well below the plaintiff's claim. The award of compensation was $95,750. In Cerini v Minister for Transport [2001] WASC 309 (S), Parker J published supplementary reasons for decision concerning costs. As a result of the O 24A offer, his Honour decided that each party should pay his and its own costs.
In the supplementary reasons for decision at [12], Parker J said:
"… On any reasonable view of the action, one factual issue dominated the case. It did so in the terms of the amount of time and costs devoted to it and to its ramifications, in preparation, evidence and submissions. This was the issue whether, by virtue of the public work and the resumption of 18 square metres of the plaintiff's land, the unresumed balance of 640 square metres was rendered valueless, or virtually so, because vehicular access became impossible. The plaintiff failed on this critical and dominant factual issue. …"
In the supplementary reasons at [26], Parker J said:
"In the particular circumstances of this case, the plaintiff pursued a claim totalling over $685,000. The compensation awarded was only $95,750. At a global and general level the plaintiff's ambitions in the action far exceeded his entitlement to compensation. At a more particular level, as is to be found in the reasons for decision, in many respects his claims proved to be without legal or factual justification or to be grossly excessive."
One of the valuers relied upon in the presentation of the plaintiff's case was Mr McMahon, the person who the plaintiff first used in his negotiations before the defendant was retained. I note that Parker J did not hold a favourable opinion of Mr McMahon. At [128] of the main reasons for decision, Parker J said:
"… Mr McMahon persisted in an evasive and unconvincing manner in denying that at the time of this hypothetical calculation and when the compensation claim was submitted, which was some months after the date of the taking of the land, he held the opinion that the unimproved market value of Lot 116 was $362,000 or $550 per square metre. …"
A second valuer was called by the plaintiff, and that person was Mr Logan. His evidence was also not regarded as reliable. The amount which had been claimed was largely based upon the opinion evidence of experts called by the plaintiff, and whose opinions were not accepted by the trial Judge.
Bills rendered by the defendant
Interim accounts were rendered by the defendant, usually on a monthly basis. The total of the costs charged by the defendant was $393,492.32. The plaintiff paid accounts rendered up until April 2001. The last payment he made was on 7 August 2001. Up until, and including, that date, he paid $105,452.58. Between the time of the trial and the judgment, the defendant rendered further interim bills, and the plaintiff said he would sell some land to pay those accounts. He did sell the land but did not pay the accounts. The total amount paid by the plaintiff is the $105,452.58 plus the balance of the proceeds of judgment received directly by the defendant - the sum of $59,470. Thus, in total, the plaintiff has paid $164,922.58.
Taxation of costs and the commencement of these proceedings
In December 2001 the plaintiff asked the defendant to itemise and tax its accounts, and in response the defendant filed at the Supreme Court a bill of costs for taxation to cover costs from 1 May 2001 to December 2001 but refused to tax accounts prior to that date. An application was then made by the plaintiff to obtain an extension of time to apply for itemisation and taxation of the accounts prior to 1 May 2001.
Then, on 22 January 2002, the plaintiff commenced these proceedings, seeking an order that the costs agreement be cancelled.
For the purpose of this hearing, the plaintiff had his current solicitors prepare a bill of costs as though the Scale of costs in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 1999 applied as in ordinary litigation. This bill was prepared assuming that items 1(a), 6(a), 9(b), 13, 14(a), 14(c) and 14(e) in the Scale applied, along with the items relating to reserved judgment and interlocutory matters. This draft bill showed a total of $174,600, and it was said that the maximum was allowed for each item. That exercise, however, overlooks the fact that the Scale of costs in the 1999 Determination has a special item which relates to compensation cases. Item 26 of the Scale of costs reads:
"Proceedings, whether by action or otherwise, for the recovery of compensation for the taking or resumption of land or any other property by the Crown in right of the State or of the Commonwealth or by any other person, body or instrumentality pursuant to any statutory power".
Against that item appears the statement: "such sum as is reasonable in the circumstances". Thus, there is no upper limit imposed in relation to compensation cases. The other items in the Scale do not apply. The single constraint on costs is that the costs charged should not exceed reasonable costs.
Principles
Section 59(1) of the Act authorises a practitioner to make a written agreement with any client of the practitioner respecting the amount and manner of payment for the whole or any part or parts of any past or future services, fees, charges, or disbursements in respect of business done or to be done by the practitioner. Section 59(5) provides:
"An agreement made under subsection (1) may be reviewed by the Supreme Court or a Judge thereof upon application by … summons, and if in the opinion of the Court or Judge the same is unreasonable the amount payable may be reduced or the agreement cancelled and the costs taxed in the ordinary way, and the Court or Judge may also make such order as to the costs of and relating to such review, and the proceedings thereon, as to the said Court or Judge may seem fit."
There are a number of cases where courts have set aside costs agreements or considered the principles which are applicable in an application under s 59 of the Legal Practitioners Act. Lying at the foundation of all of them is the fact that the relationship between solicitor and client is a fiduciary relationship. In Brown v Talbot & Olivier (1993) 9 WAR 70 at 77, Ipp J said:
"The relationship between client and solicitor is one of the most important fiduciary relationships known to the law: … Law Society (NSW) v Harvey [1976] 2 NSWLR 154 at 169‑170. In the latter case, Street CJ, in delivering the judgment of the Court of Appeal of the Supreme Court of New South Wales, said (at 170):
'Where there is any conflict between the interest of the client and that of the solicitor, the duty of the solicitor is to act in perfect good faith and to make full disclosure of his interest. It must be a conscientious disclosure of all material circumstances, and everything known to him relating to the proposed transaction which might influence the conduct of the client … To disclose less than all that is material may positively mislead'."
In Jovetic v Stoddart & Co (1992) 7 WAR 208, Seaman J identified three categories in respect of which agreement might be regarded as unreasonable for the purposes of s 59. An agreement may be unreasonable if the client can show objectively that it came into being in circumstances which were unreasonable to him, or that its terms are unreasonable to him, or that its effect upon his is unreasonable. However, as made plain by Seaman J and confirmed by Ipp J in Brown v Talbot & Olivier (supra) at 75, an agreement will not be regarded as unreasonable only if it were to be unreasonable in regard to one or more of those categories. It may well be in a given case that if each of the three categories identified is looked at in isolation without reference to the circumstances within the other categories, none independently leads to the conclusion of unreasonableness. An agreement may be unreasonable when all the relevant factors are considered as a whole. The plaintiff relies on all of these factors. In Brown v Talbot & Olivier (supra) at 27, Ipp J set out a list of material circumstances which would ordinarily apply and which might influence a client in deciding whether or not to enter into an agreement. The list is usually of particular relevance in cases of Supreme Court litigation not governed by item 26 in the 1999 Determination. This is because unless special orders for costs are made, the items in the Scale relating to the work performed in relation to the litigation, will be capped. Thus the charge for work involved in preparing a statement of claim cannot exceed a specified amount, whereas under a time cost agreement, costs could exceed the specified amount. A client in those cases needs to be told that there may be solicitors who would do the work and charge pursuant to the Scale, and that costs under the agreement may exceed the Scale allowance. The existence of the Scale will impact on the amount which the client will have to pay his solicitor, and will impact on what may be recovered from the other party in the event of success. There is a difference here, because item 26 in the Scale in the 1999 Determination does not control costs in the same way as the Scale controls costs in non‑compensation cases.
Background to the Scale of Costs in the 1999 Determination
To reach a conclusion about whether the Agreement is unreasonable or not, requires a consideration of the Supreme Court Scale of Costs and what costs might have been recovered under the Scale if there had been no Agreement. I will therefore turn to the Scale, but before doing so, I should begin with a reference to the background leading up to the Scale which applied in this case.
In 1987, the Legal Practitioners Act 1893 was amended to add Pt 6, which provided for the creation of a Legal Costs Committee, which was given the task of publishing determinations concerning costs, which determinations then regulate remuneration of practitioners. Before the amendment, and before the Committee published determinations, the maximum costs chargeable in a Supreme Court action were fixed by the Judges of the Supreme Court, and these were published in the Fourth Schedule to the Rules of the Supreme Court. At the time of the amendment to the Legal Practitioners Act, the Fourth Schedule in relation to the major item "Getting up case for trial" allowed costs on an ad valorem basis. Other items specified a maximum amount for the work involved. The Fourth Schedule in that form was introduced by amendment in 1953. In relation to this Scale, the Full Court said in Cruickshank v Producers Markets Co‑operative Ltd [1960] WAR 184:
"… the 1953 amendments to the costs rules … have introduced a novel basis for the fixing of costs, as a result of which, broadly speaking, the remuneration allowable to the profession in litigious works is to be based not on work done but on the value of the subject-matter of the lis - a value to be fixed by the court where the claim is not for a liquidated sum. Formerly the costs recoverable in a civil action were fixed by the Taxing Master after a painstaking and sometimes protracted consideration of the many items contained in elaborate bills of costs culled from diary entries and cost sheets … Under the new scale the costs allowable are by no means measured by the work actually done. …
The effect is that under the new scale the taxation of profit costs becomes a mere formality; the discretion of the Taxing Master is reduced to a minimum and the real discretion becomes that of the trial judge. His discretion it is to fix the value of the subject‑matter of the litigation where the claim is other than a liquidated sum …"
Over the years, this Scale was adjusted from time to time. How the allowances for items in the Fourth Schedule (for example, "statement of claim" - "$40 - $245", which was the range of costs as the item stood on 13 December 1985) were arrived at, no‑one knew in 1985.
So far as compensation cases were concerned, there were enough of these to attract a separate item - item 25 - in the Fourth Schedule, but it, in effect, applied the other items in the Scale, because it read:
"25.
Proceedings, whether by action or otherwise, for the recovery of compensation for the taking or resumption of land or any other property by the Crown in right of the State or of the Commonwealth or by any other person, body or instrumentality pursuant to any statutory power
The same costs mutatis mutandis as allowed in civil actions, but the Court or tribunal shall determine what is a just and equitable basis for the taxation."
The Legal Costs Committee in the 1996 Determination, which came into operation on 1 February 1997, had this to say:
"6 (1) The Committee has decided to alter the basis used for fixing the scale of costs.
(2) The underlying basis for the previous scales of costs was adopted in 1953 and was described inter alia by the Full Court of the Supreme Court of Western Australia in [Cruickshank's case (supra) - the passage from Cruickshank's case set out above was then set out in the determination]"
In pars 6(3) and 6(4) the Determination read:
" (3) It is the view of the Committee that it is no longer possible to support a scale based on an ad valorem charge for the main item of getting up case for trial. The scale of litigation and the way it is conducted has changed immeasurably since 1953. A survey of costs charged, time spent, and the amount in issue shows that the scale does not reflect the basis on which many solicitors actually charge for the provision of legal services. This has the consequence that solicitors may enter into agreements under section 59 of the Act in order to avoid the constraints of the scale. On the other hand, the Committee considers that there should not be a return to a scale which produces a bill containing numerous small items.
(4) The new scale of costs set out in the Schedule reflects the fact that the costs of legal services provided in relation to Supreme Court and District Court actions are in the main calculated by reference to the time reasonably spent in the provision of those services and by applying to that time a reasonable hourly rate, that rate varying according to the seniority and experience of the practitioner and the complexity of the work."
In par 7(2) of the Determination, a table was set out showing hourly rates which were employed by the Committee to arrive at maxima for the items of work in the scale. But the hourly rates were the "average" maximum rates charged within the profession as ascertained by the Committee by survey. The table was as follows:
| Table | |
| Fee Earner | Average Maximum Rates |
| Senior Practitioner (admitted for more than 5 years) (SP) - hourly rate | $270 |
| Junior Practitioner (admitted for less than 5 years) (JP) - hourly rate | $180 |
| Clerk/Paralegal (C/PL) - hourly rate | $130 |
| Counsel Fees charged as a disbursement to practitioners or charged by in‑house counsel: | |
| Junior Counsel (JC) - hourly rate - daily rate | $210 $2300 |
| Queen's Counsel (QC) - hourly rate - daily rate | $370 $3500 |
The survey of rates therefore revealed that there was a range of hourly rates charged. So, for example, to arrive at the $270 hourly rate for "Senior Practitioners" set out in the 1996 Determination, there were clearly some senior practitioners surveyed who, when charging at their highest rates, charged more than $270 per hour. There were some who charged less. Doubtless, the range of rates reflected seniority, expertise, demand for services, complexity of work, and other factors.
The 1996 Determination was followed by the 1999 Determination, which kept the "average maximum rates" at the same level as the 1996 Determination. The 1999 Determination applied at the time the Agreement was entered into. On 15 September 2000, another Determination came into effect which allowed practitioners to add GST to their charges, and so the rates above were, in effect, all increased by 10 per cent.
Of particular importance to this case was a deliberate change in the 1996 Determination in relation to item 25 of the Fourth Schedule, which became item 26 in the Scale forming part of the 1996 Determination and which appeared also in the 1999 Determination. Item 26 read as I have set it out above.
The position after the 1996 Determination was that costs in compensation cases were no longer to be taxed by reference to the other items in the Scale. There are, of course, cases where parties agree that the costs should be taxed as in an ordinary action. For example, in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122(S), which was a compensation case, the parties debated the issue of party/party costs, with both parties agreeing that costs should be taxed as in an action. The dispute in that case was merely about the amount by which items in the ordinary Scale should be increased. However, in the absence of such agreement, the Scale provides that costs in compensation cases are allowed if they are "reasonable". Item 26 may have been amended in that way because experience had shown that compensation cases were often lengthy cases. They often generate a great amount of work. It is not uncommon in such cases, for each party to call two valuers. Often the valuers will identify a large number of comparable sales which are said to indicate the value of the subject land. Each allegedly comparable sale becomes a case in itself, as one party seeks to show how similar the attributes are to the subject land, and the other side strives to show how dissimilar those attributes are. Often other experts are called - traffic experts or accountants. The result is that compensation cases often take weeks to try. This case took 33 days to try. Parker J's reasons are testament to the issues involved.
A taxing officer, taxing a solicitor/client bill under item 26, would have to make some decisions in principle before embarking on the detailed process of taxation. They would be:
(a)whether costs should be allowed based on time reasonably spent performing the work. In view of the policy decision made in the 1996 Determination which has applied to all Determinations since, it would be highly likely that a taxing officer would approach taxation of the bill by allowing costs to be charged for the time reasonably spent in performing the work;
(b)next, whether the hourly rates the solicitor applied to the time spent were reasonable. In my opinion, this task would be approached by the taxing officer in the following way:
(i)although the taxing officer would not regard himself or herself bound by the hourly rates in the relevant Determination (because these hourly rates relate to items other than item 26), it is highly likely that the taxing officer would pay close regard to those rates, which are, after all, average maximum rates relating to other Supreme Court work determined by survey in a competitive market;
(ii)the taxing officer would recognise that the rates are "average" maximum rates, so that for a senior practitioner (more than five years' standing) it would be obvious that some very senior and experienced partitioners may be permitted to charge hourly rates to some degree exceeding the average maximum rates and other senior practitioners with much less seniority and experience may warrant a rate below the average maximum shown in the Determination. The taxing officer would doubtless wish to be satisfied that any hourly rate charged above the average maximum rates recorded in the Determinations was not unreasonably above those rates.
Once those policy decisions were made, the taxing officer would then proceed to tax the bill. The time spent in performing work would be considered during the detailed process of taxation. Thus, if the time spent on a particular task were regarded as being excessive, then the amount charged would be unreasonable in amount and would be taxed down. If, in the opinion of the taxing officer, some item of work should not have been performed by a reasonable practitioner at all, then the costs would be held to be unreasonably incurred and would be disallowed. I now return to the facts of this case.
The plaintiff's business experience
The plaintiff described himself in his affidavit as a "businessman". He was the owner of land in Northbridge, and he retained experts to help him before retaining the defendant. The plaintiff is nearly 65 years of age. He has, since he was 21 years of age, held a real estate agent's licence and has been a registered builder. He was a director and shareholder in a proprietary company, and a partner in a partnership which owned a property portfolio. The plaintiff's company also owned a portfolio of properties. The plaintiff had also been a councillor at the City of Subiaco for six years. Over the years, the plaintiff had regularly dealt with solicitors who had looked after the preparation of leases for investment property. In 1997, he was involved in litigation with his wife in the Family Court. The plaintiff disclosed in those proceedings that he had built up assets in excess of $3 million, and that was the subject‑matter of the proceedings in the Family Court. The plaintiff was unhappy with judgment in that case. He then retained senior counsel to conduct an appeal. Those proceedings took place in 1998. On any account, therefore, the plaintiff was a man of considerable business experience and with experience in dealing with lawyers.
The question is, however, whether the fact that the plaintiff was a man with such experience, is of any relevance to the present issue. A client's level of business experience or sophistication may be relevant where some advice has been given about the difference between charges which may be made under the Supreme Court Scale compared with the charges which may be made under a costs agreement. A client of limited experience or sophistication requires more by way of explanation than a client who is experienced in business and is likely to understand the differences from a very brief explanation.
In this case, however, no advice was given about the content of the Scale or about how charges under the Scale compared with charges to be made under the terms of the Agreement, and so on that point the plaintiff's business experience and his level of understanding is irrelevant. It is relevant to the issue about the "effect" of the Agreement and the issue about the plaintiff's understanding of other terms of the Agreement which I refer to at the end of my reasons.
The most significant issue in this case is whether it matters that no advice was given by the defendant to the plaintiff about the Supreme Court Scale and what costs might be recoverable under it, compared with the costs recoverable under the Agreement.
Had any material circumstances arisen in this case?
As I have already noted, the duty of a solicitor is to make disclosure of material circumstances. If a solicitor asks a client to sign a costs agreement, and costs under the agreement will not exceed costs charged under the Scale, then there is no material circumstance to disclose. However, if there is a "sensible, real or substantial possibility" (see Clay v Clay (2001) 202 CLR 410 at [56]) of there being a difference, then there will be an obligation to make disclosure of the possibility and to explain this in terms which can be understood by the client.
Whether there is a material circumstance to disclose in this case, will depend upon this Court forming a view that, judged at the time the Agreement was entered into, there was a sensible, real or substantial possibility that a bill taxed under the Agreement would exceed costs taxed under the Scale. If not, then there was no material circumstance to disclose. I should mention, as an aside, that in a normal Supreme Court action governed by other items in the Scale (and not item 26), a practitioner will nearly always have to advise, when proffering a costs agreement based on hourly rates applied to time spent, that the Supreme Court Scale imposes caps which prevent costs rising above specified amounts for designated items of work. That would be a material circumstance to disclose. In this case, however, (a compensation case) there is no dollar cap applied to individual items of work. Instead, the restraint is that only reasonable costs are recoverable.
So, if there were a sensible, real or substantial possibility that the hourly rates charged in the Agreement were more than would have been allowed on taxation under item 26, then there was a material circumstance to disclose which was not disclosed. It will be observed that I have referred specifically to the issue about the possibility of the "hourly rates" in the Agreement being unreasonable. Although the issue of unreasonableness must be determined by reference to the Agreement as a whole, this aspect of the case, which involves an examination of the circumstances of entry into the Agreement, boils down to a close examination of the hourly rates. The reasons why are as follows.
It is important to distinguish between unreasonable charges which would be reduced during the process of taxation, and the unreasonableness of an agreement which might result in an order under s 59 of the Act.
It is also important to bear in mind that there is a difference between a taxation under item 26 and a taxation under a costs agreement. A taxing officer taxing a bill under item 26 (where there is no costs agreement) will scrutinise the bill presented for taxation, and may reduce, during taxation, both the hourly rate charged and the time spent (as explained above). This is not the case if there is a valid costs agreement in existence. Where there is a valid costs agreement, the taxing officer will scrutinise, and may reduce, the bill where he or she concludes that the bill is unreasonable in amount, either because the time spent was unreasonable, or because the item of cost was unreasonably incurred in the sense that no costs should have been incurred at all: see Flotilla Nominees (supra). However, the taxing officer taxing a bill under a costs agreement will not adjust the hourly rate which is agreed between the parties. The agreed hourly rate will be applied to the time the taxing officer finds was reasonably spent working on the case.
In this case there is a costs agreement. My task in reviewing the Agreement under s 59, and when considering whether the Agreement came into existence in circumstances unreasonable to the plaintiff, will be to scrutinise the hourly rates. It is not my task to scrutinise the time spent performing the work. The latter task is for the taxing officer. During the taxation of this bill, if the Agreement is not held to be unreasonable, the time spent performing the work will be scrutinised by the taxing officer, but the hourly rates will not.
This explains why, in this case, I must concentrate attention on the hourly rates which the parties have agreed will be charged. I now turn to consider and make findings about how, in a hypothetical taxation of costs under item 26 in this case, a taxing officer would have approached taxation. I repeat that I must compare the costs chargeable under the Scale with the costs chargeable under the Agreement.
How would a taxing officer have approached taxation of costs under item 26 in this case if there had been no Agreement?
I find that a taxing officer taxing solicitor/client costs if there had been no Agreement, and therefore taxing under item 26, would have first decided to allow costs to be based on time reasonably spent performing the work at hand. In this regard, there would be no difference between a taxation under the Scale and a taxation under the Agreement.
As I have said above, the taxing officer, taxing costs under item 26 in the absence of a costs agreement, would next examine the hourly rates charged. I will assume that in the hypothetical taxation under item 26, that the defendant charged hourly rates which corresponded with those set out in the Agreement.
In my opinion, the taxing officer would, in such a hypothetical taxation, note that Mrs Rowley had general conduct of the file up until the trial, and that her time was charged at a rate of $220 per hour plus GST ($242), whereas the maximum average hourly rate in the 1999 Determination was $297 (taking into account the GST Determination). Mrs Rowley's rate would therefore be noted to be about 22 per cent below the average maximum rate which applies to other items in the Scale. The same applied to Mr Owen. In my opinion, the taxing officer would have allowed that rate. The clerk's rate of $80‑$140 (or $88‑$154 with GST added) in the Agreement compared with a Scale rate of $143 (after GST was added). In fact, the clerk's time was charged by the defendant at the rate of $110 per hour (inclusive of GST), and therefore the rate charged for the articled clerk was 30 per cent below the average maximum rate provided for in the Scale. In my opinion, a taxing officer would allow that rate if taxing a bill under item 26.
Mr McLeod's rate was $330 (with GST). This compared with the average maximum rate in the Scale of $297 (with GST). Therefore, Mr McLeod's rate in the Agreement was 11 per cent above the average maximum rate provided for in the Scale. In my opinion, a taxing officer would not have regarded such a charge as unreasonable, because Mr McLeod is a very senior practitioner with decades of experience in the area of town planning and the related area of compensation.
The plaintiff, however, points out that Mr McLeod acted as counsel and the 1999 Determination allowed an average maximum rate of $2,530 per day (including GST) for junior counsel or $231 (with GST) per hour. In my view, a taxing officer taxing a bill under item 26, would have had regard to the daily rate when it came to in‑court work (even though those rates do not directly apply to compensation cases). The average maximum rate of $2,530 provided for in the Scale, divided by Mr McLeod's hourly rate of $330, suggests 7.6 hours per day work, and assuming 5 hours in court, allows 2.6 hours for each day for out‑of‑court preparation. In my opinion, a taxing officer, taxing under item 26, would therefore conclude that the hourly rate of $330 for court work was reasonable. It was pointed out by the plaintiff that the evidence reveals that Mr McLeod, in fact, charged for about 10 hours work for each court day. However, as I have said earlier, the time actually spent is a matter to be scrutinised during the process of taxation. The taxing officer would in the hypothetical taxation, and will in the actual taxation, assess the reasonableness of the time spent.
Mrs Rowley also appeared as counsel. Mrs Rowley's rate of $242 per hour in the Agreement would allow her to spend 10.45 hours each day before the average maximum rate of $2,530 per day would be exceeded. In my opinion, a taxing officer, taxing under item 26, would conclude that an hourly rate for Mrs Rowley for court work of $242 per hour, was reasonable. Once again, the reasonableness of time spent is a matter for taxation.
As a result of the conclusions I have reached in the preceding paragraphs, a taxation of costs under the Agreement and a taxation of costs under item 26 (assuming the hourly rates charged corresponded with those in the Agreement) would produce the same result.
Conclusion
I find that there was no real, sensible or substantial possibility that costs taxed under the Agreement would exceed solicitor/client costs taxed under the Scale. In my opinion, a reasonable practitioner in the position of Mrs Rowley, at the time the Agreement was entered into, would have formed such a view. In my opinion, there was therefore no material circumstance to disclose. As a result, the fact that there was no discussion between Mrs Rowley and the plaintiff about the Scale and its comparison with the Agreement, involved no breach of fiduciary duty. I therefore find that the circumstances in which the Agreement came into existence were not unreasonable to the plaintiff. I also find that the terms of the Agreement were not unreasonable. I should add that I find it was impossible at the time the Agreement was signed, to make any estimate of costs. Mrs Rowley had only just received the papers, and more work had to be carried out to identify the issues. Finally, on this point, I note that solicitor/client costs and party/party costs may differ, even if item 26 applied to both. This is because an item of work may be reasonable as between solicitor and client but not between party and party. For example, in a hypothetical case, a client may demand a second or third opinion from counsel on the merits of the claim. The costs of doing so would be recoverable on a solicitor/client taxation but not on a party/party taxation. The defendant advised the plaintiff about this.
I should also deal with submissions about particular aspects of the Agreement raised by counsel for the plaintiff. One submission was that the hourly rates were "incorrect or at best misleading" because they did not include GST and that "no indication" was given in cl 5.1 that the rates were exclusive of GST. In my opinion the Agreement was not "incorrect or misleading". It set out the hourly rates, and cl 9 stated that GST was to be added to those fees. Another submission was that the layout of the Agreement was "such as to cause a client to believe it deal[t] with technical, unimportant matters" because the first term of the Agreement was about storage of documents and that the subject of costs was only reached on the second page. Another complaint was that cl 5.3 allowed the defendant to charge $25 for any telephone call made or letter written by a solicitor, and $20 by a clerk.
None of the complaints put forward in these submissions provide any justification for an order setting aside the Agreement. This is because the plaintiff gave evidence, and I find, that after he was given the Agreement on 19 September 2000, he took it home with him; he read it right through; there was nothing in it that worried him; he had no questions in his mind after he read it; he understood that GST would be added to the fees charged by the defendants; he understood he was to be charged on an hourly rate and at different hourly rates depending on who did the work; and he understood that he was entitled to take independent advice before signing the Agreement. Having read the Agreement right through, and having understood it, he therefore read the provision in cl 5.3, which provided that the defendant was entitled to charge $25 for a solicitor, or $20 in the case of a clerk, for a telephone attendance or a letter in lieu of the per‑hour basis of charging. Having read the Agreement, he photocopied it, and the next day he took it back to the defendant and delivered the signed copy. In the circumstances, there was no requirement that the defendant explain the terms of the Agreement to the plaintiff. To have done so would have been to tell the plaintiff - a man of business experience - what he already knew from reading the Agreement.
The plaintiff also submitted that the effect of the Agreement upon him was unreasonable. Insofar as the plaintiff alleges that there was over‑servicing and an unreasonable amount of time spent in providing services, that is a matter the plaintiff was entitled to have sorted out on taxation. It was also suggested that the effect of the Agreement is unreasonable upon the plaintiff because there was, in effect, only about $200,000 difference between the amount which had been offered and the amount which was claimed by the plaintiff, and that the costs of the action were out of proportion to the claim. That may be so, but it was something well understood by the plaintiff. As an experienced businessman and real estate agent, he cannot, in his time in business and his time in the real estate profession, have failed to notice that opinions about the value of land can be the subject of controversy. He well understood that there was controversy in this case, even before he consulted the defendant, and he made a decision to embark upon litigation which carried no guarantee of success. The claim was that because of the resumption of 18 square metres, the remaining 640 square metres was almost valueless (that is, worth about $50,000) and that compensation of over $600,000 should be paid. The plaintiff knew that the Minister was refusing to pay the claimed compensation, and he knew it before he went to see the defendant. He knew that the effect of offers made to him left him $200,000 short of his claim. In the circumstances, the plaintiff cannot then validly complain that only $200,000 was involved and that the costs have exceeded that amount. It was something known to him. He knew what the action was costing him, because he received regular interim bills. He was advised about the "loser pays" rule. The plaintiff had the opportunity to accept the O 24A offer and recover costs, but he chose to continue with the case, which by then was estimated to take many days in hearing. This was a substantial case which took over a month to hear, and naturally the costs of such a case were considerable. I find that the effect on the plaintiff was not unreasonable.
I have also considered the complaints of unreasonableness in combination. When all these factors are considered as a whole, I still find that the Agreement was not unreasonable.
Other matters
Some evidence was directed to whether or not the case should or should not have settled, whether the defendant gave advice, and what the plaintiff's reaction was to such advice. I have no jurisdiction under s 59 of the Act to examine questions about whether or not advice was given about a settlement or, if advice was given, the quality of that advice.
I dismiss the plaintiff's application.
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